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U.S.-China conflict is a global concern and impacts markets: UAE minister

The UAE is not alone in its concerns about the “hostile confrontation” between the U.S. and China, the Gulf country’s minister of state for foreign affairs told CNBC Wednesday.

“Every time we see confrontation between Washington and Beijing, the markets actually tremble,” Anwar Gargash told CNBC’s Hadley Gamble in Abu Dhabi.

“And clearly I would say that competition between these two giants will continue, and to a certain extent, it will be natural. But I think we have an interest that this competition is more nuanced, and that it, at the same time, does not shake what is already a very weak international system.”

The conversation, spanning geopolitics, the global economy and the fight against the coronavirus, took place against the backdrop of ongoing tensions between the world’s two largest economies. The administration of President Donald Trump has blamed China for the spread of the coronavirus, which Beijing has forcefully rejected.

As the U.S. approaches its presidential election in November, and anti-Chinese rhetoric from parts of Washington grows louder, the painstakingly-negotiated trade deal between the two powers hangs in the balance. 

Just on Monday, U.S. futures fell on the back of a Fox News report that quoted White House trade advisor Peter Navarro saying the China trade deal was “over.” Navarro later denied making the statement and said his words were taken out of context, adding that the phase one trade deal remains intact. Markets recouped their losses on that news. 

“I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world,” Navarro said in a statement that day, signaling that while the trade deal may not be broken, trust was.

Later on Monday, Trump tweeted, “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!”

The precarious state of U.S.-China relations remains a point of concern for the UAE, which has strong ties with both countries: A long-held military and diplomatic alliance with the U.S., as well as a growing economic relationship with China, which in 2016 became the world’s top investor in the Middle East.

Trade between the U.S. and China is of great importance to the global economy, from international supply chains and economic growth to the costs of basic goods. 

“I would say that the UAE’s concern over this hostile confrontation is a global concern. And we’re not alone here,” Gargash said. 

“Almost everybody has huge financial, investment and trade relations with China. Like many, many countries in the world, we all recognize that America has the largest network of allies in the world and we consider ourselves an important ally of the United States. So clearly we see this confrontation, and it worries us. We would like to see a more cooperative relationship between Washington and Beijing.” 

But the minister was sober about the challenges ahead.

“We will have to balance and manage, and it is very difficult. I would say right now, perhaps we are managing — like many other countries, but more and more, we look at that and see this will be a major, major issue.” 

Economists don’t see the U.S. and China reaching phase two of the trade deal anytime soon, and have warned that continued tensions and tariff threats could stunt the much-needed economic recovery from the coronavirus shutdowns.

Phase one of the deal was signed in January, pausing the trade war that had been raging for more than a year. But even that could fall apart if relations worsen in the coming months, experts have warned. 

Gargash is well aware of this and its potential impact on the UAE, which enjoys strong trade relations with both countries and whose currency is pegged to the U.S. dollar. 

“This is a balancing act the majority of (the) countries in the world have to deal with,” he said. “And we are hoping that there is a certain stability in this very important relationship between Washington and Beijing.”

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